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Ministry of Foreign Affairs offering global banking contract

Friday 2nd December 2011

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New Zealand’s Ministry of Foreign Affairs and Trade is offering a global banking contract to handle the $110 million spent by diplomatic posts each year as it seeks to cut costs and break their habit of using hard-to-monitor cash.

The ministry has advertised for a global banking partner to cut its international banking costs and outsource payroll services at its overseas posts. It wants to consolidate 73 bank accounts with 34 banks in 38 currencies and across 48 countries into one banking relationship.

“MFAT’s current banking model has a heavy reliance on cash, low levels of electronic banking and decentralised payment and transactional relationships with banks in-country,” the tender document says. “Visibility of offshore banking transactions in Wellington is limited which impacts efficient cash management.”

Foreign posts generate 42,000 banking transactions a year, with a third of those valued at less than $250. A lack of automation means it uses significant staff time while head office can’t accurately assess its true costs, the document says.

The tender is part of an effort to remove “banking activities and accountabilities from posts” and aims to cut transaction volumes by outsourcing payroll services, staff payments and property services, and increasing the use of credit and debit cards.

The one proviso is that the lender can ensure monthly transfer of funds to New Zealand’s Tehran embassy in Iran, which has been “problematic in the past due to international sanctions applied to Iran.” A single partner is the ministry’s preference, but it’s open to using a lead provider model.

MFAT is undergoing an organisational change as it seeks to cut costs and improve efficiency as part of the government’s message to public sector bosses to make do with less. The ministry managed to trim a $2 million from its annual spend as a result of new contracts for goods and services, and is eyeing up similar savings in its review of Wellington accommodation costs, according to its 2011 annual report.

MFAT’s head office in Wellington will secure greater oversight of overseas spending, with “centralised custody and visibility of all offshore bank accounts and authorisation,” as a result of the proposed banking partnership. The major problem of the current model is its difficulty in assessing the true cost to MFAT, the document said.

It will also give MFAT’s head office more control over foreign exchange contracts, and open up opportunities to cut costs on FX transactions. The ministry spends an annual $325 million in foreign currency, including its aid programmes.

MFAT said it wants to simplify its financial operation by standardising or introducing global banking practices, cut manual transactions at foreign posts by increasing the use of electronic services, centralise processing functions at the Wellington head office and reduce the need for intervention in payment authorisation at the foreign posts.


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